BEIJING, Aug. 14, 2020 (GLOBE NEWSWIRE) — ChinaNet Online Holdings, Inc. (Nasdaq: CNET) (“ChinaNet” or the “Company”), an integrated online advertising, precision marketing, data analytics and other value-added services provider serving enterprise clients, today announced its unaudited financial results for the second quarter and six months ended June 30, 2020.
Second Quarter of 2020 Financial HighlightsRevenues decreased by 32.6% to $10.42 million for the second quarter of 2020, primarily due to a decrease in revenues from Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of the COVID-19 outbreak during the first quarter of 2020 and slow recovery in the second quarter of 2020.Gross profit decreased by 18.6% to $0.30 million while gross margin improved by 0.5 percentage points to 2.9% for the second quarter of 2020.Loss from operations improved by 16.5% to $1.02 million for the second quarter of 2020, primarily attributable to a decrease in operating expenses, which was partially offset by the decrease in gross profit during the second quarter of 2020.  Net loss attributable to CNET was $0.97 million, or $0.04 per share, for the second quarter of 2020, compared to net loss of $0.38 million, or $0.02 per share, for the same period of last year.Mr. Handong Cheng, Chairman and Chief Executive Officer of ChinaNet, commented, “Our second quarter results highlight continuing impact of the COVID-19 pandemic, despite significant sequential uptick from the first quarter. With growth and profitability remaining elusive, our second quarter results underscore the need for improvement in our existing business model and the need for new strategic initiatives going forward. While we remain fully committed to the blockchain technology initiative and view it as a potential game-changer for us, we are also actively exploring other strategic alternatives to turn around our business.”First Half of 2020 Financial HighlightsRevenues decreased by 38.4% to $14.80 million for the first half of 2020, primarily due to the decrease in revenues from our Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of the COVID-19 outbreak during the first quarter of 2020 and slow recovery in the second quarter of 2020.Gross profit increased by 48.1% to $1.20 million while gross margin improved by 4.7 percentage points to 8.1% for the first half of 2020.Loss from operations increased by 68.2%, to $3.30 million for the first half of 2020, primarily attributable to an increase in operating expenses.Net loss attributable to CNET was $3.28 million, or $0.16 per share, for the first half of 2020, compared to net loss of $1.52 million, or $0.09 per share, for the same period of last year.  Second Quarter 2020 Financial ResultsRevenuesFor the second quarter of 2020, revenues decreased by $5.04 million, or 32.6%, to $10.42 million from $15.45 million for the same period of last year. The decrease in revenues was primarily attributable to the decrease in revenues from the Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of slow business recovery after the COVID-19 outbreak during the first fiscal quarter of 2020.
Cost of revenuesFor the second quarter of 2020, our total cost of revenues decreased by $4.97 million, or 32.9%, to $10.12 million for the second quarter of 2020 from $15.09 million for the same period of last year. The decrease in our total cost of revenues during the second quarter of 2020 was primary attributable to the decrease in costs associated with distribution of the right to use search engine marketing service and cost related to providing Internet advertising services on our ad portals, which was in line with the decrease in the related revenues as discussed above.
Gross profit and gross marginTotal gross profit decreased by $0.07 million, or 18.6%, to $0.30 million for the second quarter of 2020 from $0.37 million for the same period of last year, which was primarily due to gross loss incurred from our core revenue stream, the distribution of the right to use search engine marketing service, as a result of tightened ad investment budgets by our client under the COVID-19 pandemic circumstance, which was partially offset by the increase in gross profit generated from Internet advertising business and our new Ecommerce O2O advertising and marketing services.Overall gross margin was 2.9% for second quarter of 2020, compared to 2.4% for the second quarter of 2019, primarily due to improvement in gross margin of our Internet advertising business and new revenues generated form Ecommerce O2O advertising and marketing services during the period, which have a relatively higher gross margin than our core businesses.Operating expensesSales and marketing expenses decreased by $0.11 million, or 61.3%, to $0.07 million for the second quarter of 2020 from $0.18 million for the same period of last year. The decrease in sales and marketing expenses was mainly attributable to decreased performance-based salary and bonus expenses. As a percentage of total revenues, sales and marketing expenses were 0.7% for the second quarter of 2020, compared to 1.2% for the same period of last year.  General and administrative expenses decreased by $0.12 million, or 9.3%, to $1.13 million for the second quarter of 2020 from $1.25 million for the same period of last year. The decrease in general and administrative expenses was mainly attributable to the following reasons: (1) the increase in allowance for doubtful accounts of $0.07 million; (2) the decrease in share-based compensation expenses of $0.03 million; and (3) the decrease in general departmental expenses of $0.16 million, due to a cost reduction plan executed by management after the COVID-19 outbreak. General and administrative expenses accounted for 10.9% of the total revenues for the second quarter of 2020 compared to 8.1% for the same period of last year.Research and development expenses decreased by $0.04 million, or 27.0%, to $0.12 million for the second quarter of 2020 from $0.16 million for the same period of last year. Research and development expenses accounted for 1.1% of total revenues for the second quarter of 2020, compared to 1.0% for the same period of last year.Operating lossLoss from operations decreased by $0.20 million, or 16.5%, to $1.02 million for the second quarter of 2020 from $1.22 million for the same period of last year. Operating loss margin was 9.8% for the second quarter of 2020, compared to 7.9% for the same period of last year.Other income (expense), netTotal other income decreased to $0.04 million for the second quarter of 2020, compared to $0.81 million for the same period of last year, which was primarily due to a decrease in gain from change in fair value of warrant liabilities.
   
Net loss attributable to CNET and loss per shareNet loss attributable to CNET was $0.97 million, or net loss per share of $0.04, for the second quarter of 2020, compared to $0.38 million, or net loss per share of $0.02, for the same period of last year.First Half 2020 Financial ResultsRevenuesFor the first half year of 2020, revenues decreased by $9.22 million, or 38.4%, to $14.80 million from $24.02 million for the same period of last year. The decrease in revenues was primarily attributable to the decrease in revenues from our Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of the COVID-19 outbreak during the first quarter and slow recovery in the second quarter of 2020.
Cost of revenuesFor the first half year of 2020, cost of revenues decreased by $9.61 million, or 41.4%, to $13.60 million from $23.21 million for the same period of last year, which was in line with the decrease in the related revenues as discussed above.
Gross profit and gross marginTotal gross profit increased by $0.39 million, or 48.1%, to $1.20 million for the first half of 2020 from $0.81 million for the same period of last year, as a result of the improvement in gross margin of our Internet advertising business and gross profit generated from our new Ecommerce O2O advertising and marketing services and technical solution services during the first half of 2020.Overall gross margin was 8.1% for first half of 2020, compared to 3.4% for the first half of 2019.Operating expensesSales and marketing expenses decreased by $0.12 million, or 32.9%, to $0.24 million for the first half of 2020 from $0.35 million for the same period of last year. The decrease in sales and marketing expenses was mainly attributable to the following reasons: (1) staff salary and benefit expenses and general departmental expenses decreased by $0.24 million, due to the COVID-19 outbreak during the first fiscal quarter of 2020 in China, which caused our operating offices closure after the Chinese New Year holiday in February and March 2020, resulted from the epidemic control measures imposed by the local governments where we operate; and (2) the increase in share-based compensation expenses of $0.12 million, related to restricted shares granted and issued to our sales staff during the first fiscal quarter of 2020. As a percentage of total revenues, sales and marketing expenses accounted for 1.6% for the first half of 2020, compared to 1.5% for the same period of last year.General and administrative expenses increased by $1.87 million, or 90.9%, to $3.93 million for the first half of 2020 from $2.06 million for the same period of last year. The increase in general and administrative expenses was mainly attributable to the following reasons: (1) the increase in share-based compensation expenses of $1.52 million, due to restricted shares granted and issued in the first fiscal quarter of 2020; and (2) the increase in allowance for doubtful accounts of $0.29 million. General and administrative expenses accounted for 26.5% of total revenues for the first half of 2020, compared to 8.6% for the same period of last year.Research and development expenses decreased by $0.03 million, or 8.3%, to $0.33 million for the first half of 2020 from $0.36 million for the same period of last year. Research and development expenses accounted for 2.2% of total revenues for the first half of 2020, compared to 1.5% for the same period of last year.Operating lossLoss from operations increased by $1.34 million, or 68.2%, to $3.30 million for the first half of 2020 from $1.96 million for the same period of last year. Operating loss margin was 22.3% for the first half of 2020, compared to 8.2% for the same period of last year.Other income (expense), netTotal other income decreased to $0.08 million for the first half of 2020, compared to $0.44 million for the same period of last year, which was primarily due to a decrease in gain from change in fair value of warrant liabilities.
   
Net loss attributable to CNET and loss per shareAs a result of the foregoing, net loss attributable to CNET was $3.28 million, or net loss per share of $0.16, for the first half of 2020, compared to $1.52 million, or net loss per share of $0.09, for the same period of last year.  Financial ConditionAs of June 30, 2020, the Company had cash and cash equivalents of $1.06 million, compared to $1.60 million as of December 31, 2019. Accounts receivable, net was $2.52 million as of June 30, 2020, compared to $3.26 million as of December 31, 2019. Working capital was $3.30 million as of June 30, 2020, compared to $4.92 million as of December 31, 2019.Net cash provided by operating activities was $1.17 million for the first half of 2020, compared to net cash used in operating activities of $2.33 million for the same period of last year. Net cash used in investing activities was $1.27 million for the first half of 2020, compared to $36,000 for the same period of last year. Net cash used in financing activities was $0.43 million for the first half of 2020, compared to $nil for the same period of last year. Recent DevelopmentsOn August 7, 2020, the Company appointed Mr. Charles Chiu to the position of the Company’s Chief Operating Officer and Mr. Mark Li, the current Chief Financial Officer of the Company, to serve as Secretary of the Company, effective immediately. On the same date, Mr. George Chu resigned from the roles of Chief Operating Officer and Secretary of the Company due to personal reasons. Mr. Chu continued to serve as a director of the Board of Directors of the Company.On June 23, 2020, the Company received a written notice from the Listing Qualifications Staff of The NASDAQ Stock Market (“NASDAQ”) stating that the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2), which set forth minimum bid price continued listing requirement.About ChinaNet Online Holdings, Inc.Established in 2003 and headquartered in Beijing, China, ChinaNet Online Holdings, Inc. (“ChinaNet” or the “Company”) offers online advertising, precision marketing, data analytics and other value-added services for enterprise clients. Leveraging its fully integrated services platform, proprietary database, and cutting-edge algorithms, ChinaNet delivers customized, result-driven business solutions for small and medium-sized enterprise clients in China. The Company also develops blockchain and artificial intelligence enabled web/mobile applications and software solutions for general public, enterprise clients, and government agencies. More information about the Company can be found at: www.chinanet-online.com.Safe Harbor StatementThis release contains certain “forward-looking statements” relating to the business of ChinaNet Online Holdings, Inc., which can be identified by the use of forward-looking terminology such as “believes,” “expects,” “anticipates,” “estimates” or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties, including business uncertainties relating to government regulation of our industry, market demand, reliance on key personnel, future capital requirements, competition in general and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. These forward-looking statements are based on ChinaNet’s current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting ChinaNet will be those anticipated by ChinaNet. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of the Company) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by such forward-looking statements. ChinaNet undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.For more information, please contact:Tony Tian, CFA         
Weitian Group LLC
Email: [email protected]
Phone: +1 732-910-9692CHINANET ONLINE HOLDINGS, INC.
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